As a client approaches “middle age” (generally 45 to 60 years of age), asset allocation recommendations for long-term investments have consistently been to shift an increasingly larger percentage of total investments to bonds or bond mutual funds. As a result, current retirement products have guaranteed rates over these extended periods of between 3% and 4%. No existing system provides a minimum guaranteed annual return, such as 5%, on a long term investment of mutual funds or separate accounts within variable annuities.
Further, existing art does not provide sophisticated projection and modeling techniques, such as Monte Carlo simulation to assist with assuring a guaranteed annual return.
Existing art for long-term investment includes U.S. Pat. No. 4,750,121 to Halley, et al., U.S. Pat. No. 5,126,936 to Champion, et al., and U.S. Pat. No. 5,214,579 to Wolfberg, et al. The invention of Halley, et al., provides an improved pension benefits system for enrolled employees using a master trust institution and a life insurer institution. The master trust institution receives periodic payments from employees, purchases a life insurance institution for each employee, invests in available securities, provides future projections of periodic benefits, receives life insurance proceeds, and distributes all periodic payable benefits. In order to assure a guaranteed rate of return on securities, the system invests in securities, such as Federally backed securities, that provide a guaranteed rate of return. The system determines expected income using employee income, purchased life insurance, the guaranteed rate of return securities, and life expectancy of the employees. As a result, income is relatively easily calculable, as only the life expectancy of employees is non-determinative.
Halley, et al., does not contain a method and system for guaranteeing a higher rate of return than typically provided by Federally backed securities. It does not contain sophisticated modeling techniques such as Monte Carlo simulation to provide projections of fund performance. It does not allow investor control and modification of investment selections. It does not provide a method and system for diversification guidance.
Champion, et al., provides a data processing apparatus and method that controls and implements a goal-directed financial assets management system. The system receives investor deposits at selected levels of correspondence to establish capital markets and automatically adjusts the risk exposure in any asset category to prevent the risk exposure from reaching an excessive level. Using a “market multiple,” which specifies the level of correspondence over time between the value of the investor's implied allocation in that asset group and the general market for that asset, the system can guarantee a return corresponding to the market multiple selected. Risk of collective investors is controlled overall by aggregating the market multiples for all of the investors. Use of aggregation reduces transaction costs by allowing offset of buy and sell orders among the investors.
Champion, et al., does not contain a method and system for guaranteeing a high rate of return for individual investors. It does not contain sophisticated modeling techniques such as Monte Carlo simulation to provide projections of fund performance. It does not provide a method and system for diversification guidance.
Wolfberg, et al., provides a data processing system that manages, monitors, and reports the growth in a participant's investment base with respect to progress towards achieving a predetermined target amount selected by the investor. The system monitors and controls a wide variety of financial services, such as check writing, borrowing, and insurance benefits, and the investor's initial investment may be supplemented by monthly investments. The system tracks actual growth of accounts against a predetermined guaranteed minimum rate of return on the investment base. The guaranteed minimum reflects a target date for reaching a target amount given an initial investment and monthly payment. The system uses performance above the predetermined target to produce a surplus for performance below the target.
Wolfberg, et al., does not contain a method and system for guaranteeing a high rate of return for individual investors using sophisticated modeling techniques such as Monte Carlo simulation to project fund performance. It does not provide a method and system for diversification guidance.